Food for Thought: How Much Does Industry Experience Matter When Hiring a CFO?

An interesting article from CFO.com about The Hershey Company’s recent CFO selection contains statistical evidence that appears to prove the importance of hiring CFO’s from within industry. In a study they reference, which was performed by Management CV, shareholder return was 9% greater in the first twelve months of a CFO’s tenure when the CFO had industry experience.

While this study is interesting, and not entirely surprising, it does not mean that candidates from outside the industry cannot be successful. When embarking on a CFO search, companies should place a higher value on relevant experience and accomplishments than on industry background. If the CFO’s primary charge is raising capital, a candidate with significant contacts and experience with capital markets, regardless of industry experience, can be successful. Similarly, if the CFO’s charge is to integrate newly-acquired companies, a CFO with a track record of successful integrations gained outside of the industry is likely a better candidate than a CFO from a non-acquisitive company in the industry.

Given, there are skills and experience (often compliance-related) which can only be gained in specific industries. However, by asking the question “what do we need a CFO to have accomplished?” rather than “where is our next CFO working today?”, a company launching a CFO search will start with a larger pool of candidates from which to choose and ideally, a stronger CFO as a result.